The Next 5 Years: What Will Retail Look Like?
The pandemic transformed the way we shop almost overnight, leading to an immediate rise in digital grocery sales. Shipt and Instacart responded to increased demand for grocery delivery by hiring thousands of additional workers. Many retailers, both physical and digital, followed suit with more hires of their own.
While I believe that consumers will ultimately return to physical stores to purchase the majority of their groceries, it’s clear this is the beginning of a new era that will bring forward five key areas of change for the industry:
1. Growth will be driven by digital.
Stores are significantly limited by physical circulars, which can only advertise a few hundred of the thousands of items that go on sale each week. This has been the standard practice for many years, but only a digital environment can feature every one of those items.
Additionally, targeted offers can better meet the needs of each shopper, ensuring that every customer sees the items that are relevant to them, along with items that closely match their shopping history.
2. Value will determine future success.
Consumers may prefer a particular brand for any given item. However, when there are multiple options at varying price points, preferences often take a backseat to value, particularly in recessionary periods. Consumers might be less interested in buying products that aren't on sale if comparable items are discounted. In today’s environment of economic uncertainty, value will be an important factor in determining which products consumers decide to purchase.
3. Retailers’ prominence will increase with their own brands.
Familiar and mainstream brands have dominated the market for many years. However, in 2004, industry savant Steve Burd announced his full plans to brand stores the way CPGs brand products. He was the CEO of Safeway at the time and pointed out how store brands were boring and limited by their basic packaging.
Burd wanted to foster a grocery “experience” relationship with consumers to improve brand appeal. Safeway began to remodel stores and opened additional locations using a new and unique "lifestyle" format. With nearly every grocery retailer now carrying their own well-marketed, colorful brands, that trend has certainly continued — and will be even more important in the years to come.
4. Hybrid shopping will gain traction.
While many retailers had launched various digital grocery solutions in the months leading up to COVID-19, the stay-at-home orders that followed led to a notable shift in consumer desires. Grocery delivery and curbside pickup are no longer nice-to-have options; they're now must-have features. A recent survey showed that 97 percent of consumers who ordered online plan to use grocery delivery again in the future.
This will inevitably lead to a mixed mode of shopping that encompasses elements of both physical and digital retail. Consumers might choose to order toiletries online while purchasing perishable items like frozen chicken, fish or beef from their nearest physical store. This flexibility will be important to consumers even after the pandemic has subsided.
5. The decline of free-standing inserts will continue.
Paper free-standing inserts (FSIs) came about at a time when most Americans received their news from physical newspapers. Now the world has shifted to digital media consumption, and coupons have done the same.
Digital coupons have become one of the most effective and efficient ways for CPGs to influence product purchases, allowing brands to better target and reach customers with greater accuracy and superior results. At the same time, offline FSIs have continued to decline and are expected to lose more than 20 percent of their coupon distribution from leading CPGs over the course of 2020 and 2021.
Paving a Way for Long-Term Success
Regardless of the way consumers choose to interact with brands moving forward — whether in-store or digitally — they will expect to receive customized experiences every time. Therefore, retailers must demonstrate to shoppers that they know who they are, know what their preferences are, and continue to provide them with an overall valuable shopping experience. Retailers that are able to do this will win in the long run.
Steven Boal is the CEO of Quotient Technology, a leading CPG and retail marketing technology provider that delivers personalized digital promotions and ads to millions of shoppers daily.
